Money Ills Fill U.s. History

Fiscal Challenge Started In 1776

Anyone who believes the fiscal fuss over the federal budget is a recent phenomenon might find it enlightening to look into the recesses of American history.

From the time of the early colonial assemblies, Americans have spent a significant part of their time haggling over budget-related issues. Indeed, the American Revolution's origins can be seen in the brouhaha that ensued when the English Parliament started revenue enhancement measures in 1765 to help pay the cost of the French and Indian War - the last major conflict the English had with the French.

During the American Revolution, Congress, under the Articles of Confederation, had an almost impossible time raising tax monies. When the Constitution became effective in 1788 it provided ample latitude for the legislature ''to lay and collect taxes.'' During its war for independence, the nation had amassed a deficit of $52 million.

The first U.S. revenue act was passed on Independence Day 1789. It led to levies on whiskey, snuff, carriages, sugar, legal documents and houses.

In those early days Treasury Secretary Alexander Hamilton faced an overwhelming task of trying to initiate a centralized budget.

Instead, a system was launched that required agency heads to make their requests directly to the House Ways and Means Committee.

What Congress proved, however, was that some invisible hand was working in its behalf. With no precise knowledge of income and outlays, the legislative body usually racked up surpluses, leading some presidents to complain about all the black ink.

''Our present financial condition is without parallel in history,'' moaned James Buchanan in 1857. ''No nation has ever before been embarrassed from too large a surplus in its treasury.''

Then came the economic burdens of the Civil War, which gave a new meaning to budgetary matters. The federal deficit mushroomed to $2.5 billion during the four years of the war. The load of the House Ways and Means Committee was too heavy, giving way to the creation of the Appropriations Committee, which soon gained enormous authority.

Sometimes the authority clashed with strong chief executives - rare commodities - who emerged in the post-Civil War period. One was Grover Cleveland, who was appalled at the thousands of individual pension bills, often for veterans who had no disability. Cleveland vetoed many of them.

By the time William Taft entered the White House in 1909, the government faced an $89 million deficit, about 15 percent of revenue, as a result of a recession in 1903 and financial panic in 1907. These crises led the president to appoint a budget panel. That group's report, The Need for a National Budget, accumulated dust on Capitol Hill until World War I raised annual federal spending from $700 million to $3 billion.

In 1921 the Budget and Accounting Act was signed amidst red ink. The new budgeting system was a shared one, with the president formulating through a new Bureau of the Budget, the Congress authorizing, and a General Accounting Office investigating to prepare the way for auditing.

Chicago-banker Charles Dawes was the first budget director in 1921 and he probably had more success than anyone who has held that post since. Dawes began his tenure by berating Congress during his confirmation hearing. In that appearance he lambasted Congress for providing him with a ''toothpick with which to tunnel Pike's Peak.'' At that time the national debt was more than $25 billion.

The heads of federal agencies cooperated by cutting their spending 25 percent or more. As a result, in his single year as director of the budget, Dawes cut government expenditures by a third and recorded a surplus equal to 22.4 percent of outlays.

But the honeymoon among the Congress, president, and public was short-lived. When the Depression hit, the finger-pointing resumed and the confusion prompted a bureaucratic reorganization. In 1939 the Budget Bureau was moved from the Treasury Department to the president's jurisdiction.

Of course, some congressmen today lament that the budget torch was passed in 1921 from the informal congressional system to an executive department. They look back to the long period from 1789 to 1921 when they really controlled the government purse. In fact current congressmen may find solace in the words of former House Speaker Joseph Cannon. In 1919 he warned about the new system: '' . . . When Congress consents to the executive branch making the budget it will have surrendered the most important part of a representative government. . . . Taxation without representation brought this nation into being, and I think we had better stick pretty close to the Constitution with its division of powers well defined and power close to the people.''